1. The Obama-Geithner plan would lower the statutory corporate
tax rate to 28 percent from 35 percent, currently the
second-highest among advanced economies. But that would still
leave the combined U.S. corporate tax rate—state and federal—at
32.2 percent, far above the OECD combined average of 25 percent.
The U.S. combined rate would be a bit below slow-growing Japan
and France but above the U.K. and Germany. That’s not nearly good
enough. Canada just lowered its corporate tax rate, for instance,
to 15 percent. So instead of having the second highest corporate
tax rate in the world, the United States would probably
be fourth behind Japan, France, and Belgium.

2. The Obama-Geithner plan would establish, according to the
New
York Times, a minimum tax on multinational corporations’
foreign earnings to discourage “accounting games to shift profits
abroad” or actual relocation of production overseas.

So instead of a carrot, Corporate America gets the stick. Instead
of lowering the U.S. rate to a competitive level, Obama
would raise the penalty on keeping profits overseas. Indeed, the
United States is a huge outlier in that it taxes the foreign
profits of multinational companies. Here is Obama’s
own Jobs Council:

While most other developed nations have adopted territorial
systems that exempt most or all foreign income from taxes when
they are repatriated, the U.S. subjects all worldwide earnings to
the corporate income tax when they are brought home to the U.S.
This approach actually encourages U.S. companies to keep their
earnings abroad rather than investing them here at home. Adopting
a territorial tax system would bring us in line with our trading
partners and would eliminate the so-called “lock-out” effect in
the current worldwide system of taxation that discourages
repatriation and investment of the foreign earnings of American
companies in the U.S.

3. To pay for the lower tax rate, Obama would
eliminate ”dozens of tax loopholes and
subsidies,” according to Politico. But some of the money would
be used to “lower the effective rate on manufacturing to no more
than 25 percent, while encouraging greater research and
development and the production of clean energy,” according to the
Times.

First, the effective manufacturing tax rate would be higher than
25 percent once you add back state taxes. Second, the White House
is sticking to its clean energy agenda even as other advanced
economies like Germany and Spain are abandoning such wasteful
subsidies. Again, this is ideology trumping economic reality.

4. Obama and Geithner apparently still don’t
understand how harmful corporate taxes are. Here’s
the OECD: “Corporate taxes are found to be
most harmful for growth, followed by personal income taxes, and
then consumption taxes.”

5. Obama and Geithner apparently still don’t
understand who bears the burden of corporate taxes. It’s
workers.AEI economists Kevin Hassett and Aparna Mathur have found that
“corporate tax rates affect wage levels across countries. Higher
corporate taxes lead to lower wages. A 1 percent increase in
corporate tax rates is associated with nearly a 1 percent drop in
wage rates.”

6. Obama and Geithner apparently don’t understand
that “corporate income taxes have a highly significant and
negative effect on long-term growth,” according to
the Tax Foundation:

7. Obama and Geithner apparently don’t understand
that U.S. corporate tax rates are so off the map that the best
way to maximize revenue would be to flat out cut the top
corporate rate 8.6 percentage points to 26.4 percent.
You could then eliminate corporate welfare and take the rate even
lower.

8. Obama and Geithner would take the top individual tax rate to
40 percent, leaving a 12 percentage-point gap with the corporate
tax rate. This creates a huge incentive for tax
sheltering.

Bottom line: Real pro-growth corporate tax
policy would eliminate tax breaks, dramatically lower tax rates,
and only tax profits earned at home. The Obama plan would
actually make the corporate tax code and the U.S. economy less
competitive and less productive. But the proposal does neatly fit
into the president’s Occupy-inspired campaign theme that wealthy
Americans and greedy corporations are to blame for the Great
Recession and rising income inequality. Besides, how can
Democrats ever raise taxes on the middle-class to pay for all
their spending ideas without first socking it to the 1 percent
and to business?

Obama had no experience in the private sector before becoming
president. The free market is a sort of theoretical construct he
learned about in college. But Geithner should know better. He’s
had lots of contact with all sorts of executives, both at
Treasury and when he ran the New York Federal Reserve Bank. If he
has any doubts about this plan, he should resign. And if he
doesn’t, he never should have gotten the job in the first place.